HRM430: Compensation & Benefits
Chassity K. Moody
DeVry University Online

In a job market like the current one, attracting and retaining the best help is challenging. The key to finding and keeping good employees is creating an environment in which they would want to work. We have all heard about surveys that demonstrate that it is far more than mere compensation that motivates employees to stay where they are. It is the same when potential candidates are assessing their options and choosing which opportunity they will accept.
The current competitive conditions in the business world make it difficult to acquire and retain the top talents. Once the organization is able to identify, it can be unable to offer the right pay and to manage the pay increases to retain top talents. The compensation strategy is the extremely important piece of the overall HR Strategy to keep the company competitive and successful. On the other hand, the compensation strategy is important to keep the personnel budget under the control and to manage the jobs in the right salary (pay) brackets. (Ulich, D, 2011)
The focus on compensation is most often the most important source of the job. It is taken for granted because of the amount of salary that is received. In non-profit organizations there are obvious challenges when it comes to providing competitive salary and benefits to attract and keep the best staff. If Family Christian Health Center could market their strengths, it would make a difference, offer interesting and vibrant challenges which make a positive working relationship. Family Christian Health Center needs to control cost and the best way to accomplish this by establishing a responsive compensation and benefits system that can track costs that would be understood by employees, which can keep in touch with employees’ desires and what is poplar in the market. Understanding that if that the personnel being 60% of the General Fund budget, and more with the inclusion of appropriations to support personnel, the majority of the budget balancing options need to either come from a reduced workforce or a less expensive workforce (reduced pay and benefit levels). The opportunities for position reductions are being developed through a Planning Process within the organization and would not be considered for review in this initiative.
The employees are in the same situation as the consumers. They have the problem to distinguish the employers and they are not able to recognize the excellent organization, when it is not different from the rest. (Adsit, 1998) The competitive advantage is the essential part of the mix for the success. The organization has to present itself differently, not just by the presentation, but it should differentiate itself by the different approach toward its employees. The compensation strategy is one of the most successful differentiators.
The excellent compensation strategy does not just differentiate the organization from the other organizations on the job market, it brings the differentiation into the organization as well as the successful employees and top talents feel the success in their pockets.
The effective compensation strategy makes people feel the success and they speak about their successes with their friends. It builds the extremely excellent competitive advantage among the competitors as the people feel, the organization really values the success and it can pay the successful employees.
The effective compensation strategy manages the personnel expenses of the organization, but it supports the performance management and differentiates the employees as the successful ones are not motivated to search for a new job opportunity. The good compensation strategy does not provoke employees to search the web job boards during the working hours, it makes them to focus on delivering the results as they can be highlighted and they feel the highlight in their salaries.
The successful compensation strategy gains the competitive advantage and can speed up the innovation processes and improve the performance management practices in the organization.
Understanding the nature of the employees that are hired by the company can make the determination in which a company is as successful as they can be. This is critical to how things can function. High turnover plays a major impact on the benefits that can be offered; that is a misconception that things one thing does not affect another but it does. When accounting for the costs (both real costs, such as time taken to select and recruit a replacement, and also opportunity costs, such as lost productivity), the cost of employee turnover to for-profit organizations has been estimated to be up to 150% of the employees' remuneration package. There are both direct and indirect costs. Direct costs relate to the leaving costs, replacement costs and transitions costs, and indirect costs relate to the loss of production, reduced performance levels, unnecessary overtime and low morale.
Things to consider are the benefits package, especially one that offers a good health plan, helps attract and retain quality employees. Businesses such as Family Christian Health Center get a tax advantage of deducting plan contributions, if they plan accordingly they can offer a package that will allow them to reward their staff and not lose sight of what their contentions are. Employees often will accept better benefits in lieu of a higher salary, which can be a savings to the business. Offering benefits to employees also can be advantageous to a business owner, who may be able to get personal benefits for less money than if he or she purchased them privately. Offering health insurance has been shown to decrease absenteeism and improve employee health and morale is an added bonus to why employers should offer a competitive compensation package.
Family Christian Health Center has recognized that they are experiencing a high turnover because of the lack of an adequate compensation package which is critical to the needs of what is important to the employees. It is not the competitors that make working for them difficult it is not providing benefits costs that can be a burden because they are a semi small establishment as oppose to the large ones, even though both in aspects they can pay higher prices because of lesser buying power, and due to relatively higher costs of administration. They have less choice in designing a retirement plan because of administrative costs. But being understanding in regards to if benefits are offered it must be an administrative overhead. As the cost of health insurance steadily rise and this is making it less and less affordable, and making financial planning difficult from year to year.
Compensation decisions for nonprofits can be difficult because organizations are often balancing twin aims of recruiting and retaining highly skilled and highly valued individuals, and complying with laws that prevent unfair or unreasonable compensation.
Overall the objective of the compensation plan is to be effective, it should be simple, direct, understood, in line with the goals of the company and maintains focus. Analyze all new data as soon as possible and after the analysis again communicate all new factors through reports. To ensure both internal and external equity, employers must establish an effective compensation administration program. To do this, employers must conduct: * Job analysis (thoroughly analyze and describe each job) * Job evaluation (determine what jobs are worth on an absolute basis and relative to other jobs in the organization) * Job pricing (establish rate ranges; that is, minimum, midpoint, and maximum dollar values for each labor grade)
Overall the objective is to have a Smart Compensation Plan that compensates plan and benchmark salary. Key topics to include should be to plan ahead, weigh your compensation data, calculate the midpoint of a salary range, perform compensation analytics and stay consistent and perform regular updates.
References:
(2006). Harvey: www.familychc.org
U.S. Department of Labor, Bureau of Labor Statistics, total separations Leisure and Hospitality (not seasonally adjusted), Series ID JTU70000000TSR, http://data.bls.gov/cgi-bin/surveymost?jt "Job Openings and Labor Turnover Survey "
Schlesinger, Leonard A.; James L. Heskett (1991-04-15). "Breaking the Cycle of Failure in Services". MIT Sloan Management Review 33 (3): 17–28. http://sloanreview.mit.edu/the-magazine/articles/1991/spring/3232/breaking-the-cycle-of-failure-in-services/. Retrieved 2009-01-21.
Ulirich, D. (2011). Why is compensation strategy important? Retrieved from http://www.simplehrguide.com/why-is-compensation-strategy-important.html

Adsit, Angela, and Cindy Mah. 1998. What's It Worth: Compensation Review for Charitable Organizations in Alberta and Saskatchewan. Edmonton, Alberta: KPMG for the Muttart Foundation.